Relevant Cost Analysis in Decision Making (Producing Own or Buying From Outside) at Old Bakery

Analisis Biaya Relevan Dalam Pengambilan Keputusan (Memproduksi Sendiri Atau Membeli Dari Luar) Pada Old Bakery

Abstract

This study aims to analyze the application of relevant costs in the decision to produce in-house or purchase from outside (make or buy) at Old Baker. Increasingly fierce competition in the bakery sector and declining production capacity require management to make efficient decisions based on accurate cost information. This study uses a quantitative approach with a case study method applied to Old Bakery. The data used consists of primary and secondary data obtained through interviews, observations, and documentation of production costs. Data analysis was conducted by identifying and comparing relevant and irrelevant costs for the alternatives of producing in-house and purchasing from outside. The results show that gas and electricity costs are the main relevant costs that significantly affect total production costs, while fixed costs are not a primary consideration in short-term decision-making. Under conditions of declining production capacity, the alternative of purchasing semi-finished products from outside (buy) results in lower total relevant costs than the alternative of producing in-house (make), making it more efficient and carrying a lower risk of loss. Therefore, the application of relevant cost analysis can assist Old Bakery management in making more rational and efficient production and sales decisions, while supporting business sustainability.